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Kroft et al document the raise of long-term unemployed in the US during the recent crises. This is an impressive figure from their paper:

Time Series: unemployment rates

They show that the raise does not come from compositional effects. However, they cannot find the reason for this phenomenon. For some reason, apparently, long-term unemployed are less likely to find a job, and hence their stock accumulates.

Potential reasons I could think of are

  • Human capital deterioration
  • Discrimination of employers
  • Shrinking motivation of searching

What other reasons does the literature find? Is there empirical support for any of this?

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  • $\begingroup$ I'd go with your reason number three; see the last paragraph at this link: en.wikipedia.org/wiki/…. Note the 99 weeks for some workers. $\endgroup$ – RobEconomix May 5 '15 at 14:59
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I would "advise" to wait... a few more years! From the figure you provided, there is a perhaps slow but visible rising trend (with business-cycles-like "seasonality") for both the long-term and the mid-term unemployment rate, a fairly stable trend in terms of steepness over 60 years. The sudden peak of long term unemployment in 2009 is impressive but it also fell sharply in the next three years. To me, it appears critical to know the unemployment rates for the next four-five years, in order to decide whether we have a structural break with the historical rising trend becoming more steep, or just a few-years-incident due to the crisis.

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    $\begingroup$ Well, but independently of whether it's a structural break, or a "few-years-incident", it would be interesting to know why it happened, which is what this question is after - as opposed to the question "is this going to be an ongoing phenomenon or not". $\endgroup$ – FooBar Apr 20 '15 at 13:03

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